You’ve got the idea; you’ve got the drive. Now all you need is the money to get started on your new business. Unless you are one of a very small group, you are going to have to raise it somehow. You can approach the bank for a loan, or you can explore some different options.
Loan or Equity
There are two main ways to raise cash to start your business, and you need to decide which works best for you.
A loan can be straightforward. You receive a sum of money to invest in your business, and you pay it back later. You remain in control of your business, but your overheads now include the interest and your cash flow is affected by repayments.
Equity is effectively the sale of part of your business to an investor. You do not have the burden of repayments, but you will share the profits and lose some control.
Do It Yourself
You may not have cash to hand, but you probably have assets that you could use to raise a loan—your house, perhaps. You are borrowing money against your own property to invest in your business. If the business fails, you could lose your home—but the fact that you have put your money where your mouth is will encourage other investors.
Family and Friends
Many entrepreneurs start off by borrowing from close contacts, or by offering them a share in the business in return for a startup investment. If you go this way, have your agreement drawn up professionally—informal arrangements are a recipe for disaster. Remember that if things go wrong, you could lose your friends as well as your business.
Line of Credit
A flexible way to borrow money is through a line of credit, where you negotiate a maximum amount that you can borrow (rather like a credit card) and then borrow and repay in a way that is convenient to you. http://businesslineof.credit/ is a good source of information about the loans that are available.
Crowdfunding
This online way to find investors has become very popular in recent years. Using one of the many platforms, you can put out your business vision to a very large number of individuals, who can either lend money or invest in the equity of your business.
Angels
Rather than seek a large number of small investments through crowdfunding, you could try to reach a smaller number of individuals with significant funds to invest. They often operate through groups, and your local chamber of commerce may be able to put you in touch.
Small Business Administration
The government is committed to creating a good environment for small businesses, so you may qualify for an SBA loan. These are targeted at particular areas, and it is well worth researching whether you are eligible.
Explore the Ground
There are many avenues to raise cash to get a new business off the ground. By getting to the stage of needing startup money, you have already demonstrated resolution and commitment. You need to draw on that same resolution to nail the deal that is right for you.
